Theranos – Silicon Valley’s Greatest Disaster

Summary

Highlights

• Theranos was a Silicon Valley startup that promised groundbreaking blood testing technology. 🧪
• Elizabeth Holmes, the founder, misled investors with claims of revolutionary tech capabilities. 🚀
• Finally exposed by The Wall Street Journal, the company's practices were deemed fraudulent. 📰
• Holmes and her partner faced criminal charges, and Theranos was dissolved in 2018. ⚖️
• Despite Theranos’ failure, the story highlights the dangers of unchecked ambition and deception. 📉

Key Takeaways

• Elizabeth Holmes was a master manipulator, convincing high-profile investors to fund Theranos with over $600 million. 💰
• Theranos claimed to revolutionize blood testing with technology that ultimately didn’t work as promised. 🩸
• Despite legal warnings and failing technology, Holmes continued to deceive stakeholders and the public. 🤥
• The Wall Street Journal investigation in 2015 was pivotal in exposing Theranos' fraudulent practices. 🕵️
• After the exposure, Holmes and her partner Sunny faced legal charges, and the company collapsed by 2018. 🚨

Overview

Chapters

• 00:00 - 04:00: The Rise of Theranos Theranos began as a promising startup in 2003 with grand ambitions. It is now regarded as a cautionary tale, as its founder, Elizabeth Holmes, once seen as a visionary, has been indicted on federal wire fraud charges. Initially perceived as a game-changer, the company ultimately became one of the most notorious fraud cases.
• 04:00 - 10:00: Elizabeth Holmes and the Vision of Theranos The chapter discusses the rise and fall of Theranos, a company founded in 2003 by Stanford dropout Elizabeth Holmes. Initially, Theranos claimed to have developed a revolutionary blood testing device capable of running numerous tests from a single finger prick sample, promising convenience and innovation in healthcare technology. Despite raising over $600 million in funding, the narrative ultimately unfolds as one of deception and fraud. The chapter explores the manipulative and deceitful actions of Elizabeth Holmes, as she prioritized her ambitions over ethics, leading to significant legal consequences and the company's downfall.
• 10:00 - 15:00: Challenges and Internal Struggles This chapter explores the rise and fall of Theranos, a once highly valued company worth nine billion dollars that eventually became one of Silicon Valley's most notorious failures. The narrative begins by introducing Elizabeth Holmes, the founder of Theranos, highlighting her ambitions from a young age, driven by her affluent and historically significant family background. The chapter sets the stage for understanding how her personal goals intertwined with the company's trajectory, leading to its ultimate downfall.
• 15:00 - 20:00: Partnerships and Deception The chapter 'Partnerships and Deception' outlines Elizabeth's early influences and important connections. At 18, she was already a billionaire and during a Stanford tour in China, she met Sunny, a wealthy entrepreneur 20 years her senior who had profited $40 million during the dot-com boom. His financial success and status were attractive to Elizabeth. Sunny became instrumental in her company's future. Additionally, Elizabeth's observation of the SARS outbreak during an Asian trip significantly impacted her, solidifying her resolve upon returning home.
• 20:00 - 25:00: Cracks Begin to Show The chapter titled 'Cracks Begin to Show' describes a character's intense dedication and ambition to change the world. Upon returning home, she isolates herself in her room for five days, working tirelessly on an idea for a wearable patch that could test blood and administer medicine in real time. Her determination leads her to drop out of Stanford at age 19 and start her own company. Despite her aspiration, the early days are challenging, with the company office located in a dangerous part of town.
• 25:00 - 30:00: The Unraveling In the chapter titled 'The Unraveling', Elizabeth experiences a life-threatening incident when a bullet narrowly misses her. Despite this harrowing event, she secures a $1 million seed investment from an old neighbor who profited from early investments in Hotmail. Elizabeth hopes to leverage the reputation of her initial investors, but she faces challenges when trying to persuade investors with expertise in medicine. Her lack of medical knowledge becomes apparent, largely because she only attended a few semesters at university. This is in contrast to some tech entrepreneurs, for whom incomplete formal education does not hinder success, as exemplified by Mark Zuckerberg's journey.
• 30:00 - 35:00: Investigation and Fallout The chapter titled 'Investigation and Fallout' describes the evolution of a blood testing startup. Initially founded by a young entrepreneur with minimal university education, the company received significant financial backing, approximately 6 million dollars by year's end. Over time, the startup's concept evolved into a cartridge and reader system for conducting blood tests, where patients would use a small device to prick their fingers, collect blood in a cartridge, and have the tests run when the cartridge is inserted into a machine.
• 35:00 - 40:00: Reflection and Closure The chapter, titled 'Reflection and Closure,' discusses the envisioned transformation in fairness testing procedures, where machines are imagined to conduct tests and immediately send data over the internet to laboratories for quick interpretation and reporting. This innovative approach contrasts sharply with the traditional method, which involves drawing a blood sample with a syringe, physically sending it to a lab using large, cumbersome machines, and waiting several days for a doctor's results. Theranos aimed to drastically miniaturize the components of these large testing machines.

Theranos – Silicon Valley’s Greatest Disaster Transcription

• 00:00 - 00:30 Thera nose began as a startup of almost mythical proportions and goals in 2003 it's just an incredible morality tale a woman once hailed as a Silicon Valley visionary is facing federal fraud charges tonight Athena's founder Elizabeth Holmes has now officially been indicted on federal wire fraud charges the US Attorney's Office accusing her of indeed imagine building a company that everyone thought would change the world but ended up being one of the biggest frauds in
• 00:30 - 01:00 history Thera knows the company started in 2003 by Stanford dropout Elizabeth Holmes was just that they fooled everyone receiving over six hundred million dollars of funding in the process what farah naaz promised was a revolutionary blood analyzer that could run hundreds of tests just from a finger prick in the comfort of your own home however this story isn't one of great success or inspiration this story is about deceit fraud manipulation and a CEO who would stop at nothing to get her
• 01:00 - 01:30 goal this is the story of thoroughness a company once worth nine billion dollars and the story of how it all came crashing down in one of the worst disasters in Silicon Valley history what exactly was Thoreau knows and how did it go so horribly wrong [Music] Elizabeth Holmes was born to a well-connected family with a rich history from a young age Elizabeth knew what she wanted in life to be a
• 01:30 - 02:00 billionaire at age 18 she went on a Stanford run tour of China where she met a man 20 years her senior called sunny sunny immigrated from Pakistan and had some success in the.com boom of 1999 pocketing 40 million dollars in the process he had what she wanted money and the status of a successful entrepreneur sunny would later play a big role in Elizabeth's company during another trip to Asia Elizabeth witnessed the SARS outbreak from that point she came home determined
• 02:00 - 02:30 to change the world upon returning home she didn't leave her room for five days and slept two hours and night while working on a patent idea the idea was to create a wearable patch which could continually test the blood of the wearer and admit the right dose of medicine in real time filtered determination she dropped out of Stanford at age 19 and started her own company the early days were not glamorous the office of the new company was in a part of town known for shootings one day while in her car
• 02:30 - 03:00 Elizabeth was shot at with the bullet just narrowly missing her despite this she received a 1 million dollar seed investment from her old neighbor who had made some money investing in hotmail early on Elizabeth wrote on the reputation of her investors however when it came to investors that specialized in medicine she struggled to convince them as a lack of knowledge started showing it wasn't a surprise because she had only spent a few semesters at university so for most tech entrepreneurs this kind of thing isn't a big issue for example Mark Zuckerberg only needed to master
• 03:00 - 03:30 coding as a child and he could have struck it big with little university knowledge on the other hand medicine and chemistry are fields that require decades of knowledge and research to find a breakthrough regardless by the end of the year Elizabeth had nearly 6 million dollars in funding and her idea had changed now the blood testing would be done by a cartridge and reader system he is how it was supposed to work patients would prick their fingers storing blood in a small cartridge pushing this cartridge into a machine would run the tests the
• 03:30 - 04:00 fairness machines envisioned would perform tests on the spot and beam information via the internet to a lab where personnel would interpret the results and send a report back traditionally the current industry procedure was to draw a syringe full of blood from a vein and physically send the sample to a lab the old way use large machines the size of several business photo copiers and the results will take a few days to get back from a doctor Thera nos would try to scout down the components of these massive machines to
• 04:00 - 04:30 fit into a box the size of a personal computer thoroughness was going to make this process faster more comfortable and completely bypass the need for a doctor in this particular medical field there are many components that are used to test blood each of which performs a different type of test for example one test shoots a beam of light into the sample blood and measures the light reflected while other tests require chemical reactions now this is the big liar and the problem with fairness there were several issues that made the thoroughness machine is nearly impossible firstly the components would
• 04:30 - 05:00 interfere with each other when placed in close proximity due to a magnitude of problems including heat light and electrical activity next to have sufficient volume of test samples from only a pinprick on a finger the drops of blood had to be diluted over diluted samples gave inaccurate results and was outside the detection capability of the hardware so in short for the technology to be possible fairness had to make major breakthroughs on all fronts of blood analysis they had to do all of
• 05:00 - 05:30 this while only reporting to Elizabeth who didn't really have the knowledge skipping forward to 2006 thier anastomosis era nurse 1.0 Elizabeth enlisted engineers to design a new version called the Edison however no fairness machine would ever be accurate or capable of performing the full range of tests that Elizabeth claimed Elizabeth started to push the engineering team manager to make the Edison development around 24/7 when the manager refused stating that the
• 05:30 - 06:00 engineers were overworked as it is Elizabeth hired a parallel engineering team and pitted the two teams against each other in a survival of the fittest race this kind of thing was actually a tactic that Steve Jobs also used with the original Mac in the iPhone but in fairness his case the losing team would be fired Elizabeth also started doing some ethically questionable things such as running a pilot test on cancer patients with the company Pfizer she knew the product didn't work yet but insisted on running real tests on people that had serious illnesses to highlight
• 06:00 - 06:30 how serious this was blood tests are usually used to increase or decrease a patient's dosage of medication or diagnose conditions which may require immediate action doctors his lab results today 70% of their decisions on if the results are false it could be fatal of course the only reason the cancer trials went ahead is that Elizabeth had been outright lying to investors and clients up about how well the product actually worked the same year the company's CFO discovered that Elizabeth had been lying he told it a stop instead
• 06:30 - 07:00 of agreeing she fired him on the spot after this Elizabeth never hired another chief financial officer again leaving the position vacant for a decade in 2007 there was no biggest Silicon Valley stars and Steve Jobs Elizabeth has started developing an obsession for jobs an employee even found a newspaper cut out on a desk where someone called her the next Steve Jobs the obsession bordered on insanity for example after she found out that Steve scheduled
• 07:00 - 07:30 marketing meetings on Wednesdays she would do the same with the same marketing firm that Steve used she would even recruit a few Apple employees one of this included one of Steve Jobs as oldest friends and the former senior vice president of software at Apple av2 vania he even went out of retirement to join the Fairness board the board of fairness was made up of a star-studded panel Don Lucas who mentored the founder of Oracle was the chairman one day Elizabeth once it's a restructure the company shares which would give her majority voting rights X Apple employee
• 07:30 - 08:00 AV who was on the board didn't think that this was a good idea and paired with the information that he'd received from employees about the problems during testing he felt like he had to do something he spoke with Don Lucas the chairman but this resulted in AV resigning after he felt that his advice fell on deaf ears Elizabeth had the board wrapped around her finger she was a master manipulator she spoke in a low baritone voice in order to be taken more seriously the question was as a nineteen-year-old how do you go about
• 08:00 - 08:30 the process of convincing people that you know what you're doing it's about finding people who believe in you because the worst possible thing in the world is to have someone who doesn't believe in you backing you because it's not going to result in a good situation on occasion she forgot to put on the voice and was caught using a natural voice before realizing and dropping several tones has it well if I use traditional words to describe what we're doing it's hard because people then associate it with conventional processes for an alleged drug shortly after the company moved to
• 08:30 - 09:00 a prime location in Silicon Valley a new member of the sales team soon found out that the financial projections were based off pilot tests that weren't honest the issue was brought to the board who ran an emergency meeting and decided to fire Elizabeth two hours after they brought her in to tell her the decision she had convinced them to reverse it this incredible power of persuasion is another reason why fairness went so far with no real working technology shortly after the meeting Elizabeth fired those who raised
• 09:00 - 09:30 the alarm by this stage employees leaving or being fired was common in fact all employees who came from Apple would leave in just a couple of years around this time an old family friend Richard foolís created a patent for a method of transmitting information from blood testing machines to doctors he did this out of eventual spite for not being asked advice when Elizabeth started the company in his field of expertise he was a doctor he sold his medical demonstration video company for 50
• 09:30 - 10:00 million dollars in a few years time Richard will go to court with fairness over the patent he made which in private he called the thoroughness killer Richards patents wouldn't go on to kill fairness but his actions would by 2009 Sonny the millionaire Pakistani immigrant was now Elizabeth's boyfriend and had joined the company as second in charge sunny came from a software background and had little knowledge of the inner workings of a medical company he claimed to have written 10 million lines of code while at Microsoft but the
• 10:00 - 10:30 average developer at Microsoft only writes a thousand lines a year he also boasted of having extreme wealth and only coming to work because he wanted to he also had a habit of latching on to buzzwords and using them despite little knowledge of the topic engineers would use terms out of context to see if we'd continue to use them he did but Sonny knew how to control people he was feared within the company he constantly fired people and let his tempers flare 2010 saw a whole lot of money pouring into Silicon Valley Facebook Twitter and Eber
• 10:30 - 11:00 were all taking off meanwhile Walgreens and Safeway had both entered talks with farah naaz to partner and create wellness centers these were sections in their stores where patients could get blood tests Theron Oz presented Walgreens with a hundred and ninety two different tests that could be performed by their Edison machine however only about half of them were even theoretically possible the only proof that the technology worked was a review from John Hopkins Medical School the document was only two pages long and
• 11:00 - 11:30 summarized a meeting where therenear showed the university representatives some data results no actual testing was done on the machines themselves but thoroughness was hot stuff and walgreens had the fear of missing out and letting their competitors land a partnership Elizabeth also made such an impression on the Walgreens and Safeway executives that they trusted every word she said combined Safeway and Walgreens gave theranos a hundred and five million dollars in investment in loans around this time Elizabeth realized that the Edison wasn't good enough so she
• 11:30 - 12:00 commissioned the mini lab the third iteration of the blood testing product meanwhile sunny intimidated employees and watched CCTV footage of them to see exactly how long people were working one time he told an employee that he would quote fix him after finding that he'd only worked eight hours per day Elizabeth backed up the decision stating two employees that quote if anyone here believes that you are not working on the best thing humans have ever built or if you're cynical then you should leave end quote
• 12:00 - 12:30 basically anyone who agreed with Elizabeth got promoted and those who doubted got fired by 2012 Safeway wasn't doing well they had poured 350 million dollars into renovations as store space across their store locations in anticipation for the thoroughness machines they were only met with constant launch delays and excuses when fairness did start accepting Safeway employee samples they were tested on existing commercial third-party machines in a lab but Safeway was lied to and given the
• 12:30 - 13:00 impression that all of these tests were being performed on fairness Edison machines they weren't even running most of the tests on the fairness devices and most the tests are being run on third-party machines did miss Holmes know at the time that fair nose could not do all those tests yes meanwhile fairness is lawsuit from Richard the jealous family friend and medical doctor was in full swing he was serious about taking fairness
• 13:00 - 13:30 down he hired the same lawyer that worked on the deposition case of Bill Gates and the cost $1,000 now a pivotal point for fairness is downfall came with the subpoena of Ian Gibbons who had led the chemistry team since 2005 in May of 2013 Ian was notified by fairness that in just two days time he would be involved in Richards trial he feared that anything that he might say may put the company in jeopardy and exposed the liars Ian was miserable of fairness and had just been demoted but feared that
• 13:30 - 14:00 leaving as a 67 year old would make it impossible for him to get another job the next morning Ian's wife Rochelle found him in the bathroom having overdosed on medication he died a week later in hospital Beckett theranos in a display of the coldest heart Elizabeth didn't return Rachelle's call about the death of her husband elizabeth informed only a small number of employees about Ian's passing and loosely mentioned hosting a service this was never carried out she seemed to have just brushed off Ian's death pretty
• 14:00 - 14:30 casually after spending two million dollars in the case Richard settled in a massive blow to his pride this would fuel the fire in Richard that would eventually bring down fairness during this period theranos was still carrying out tests on third-party machines and desperately trying to get results this included stacking six mini labs on top of each other to get high throughput of tests the additional heat generated actually hindered the accuracy of tests further but their nose didn't have time to work on their technology they had already promised their machines to the world and they had
• 14:30 - 15:00 a 140 million dollar contract with walgreens which required them to launch by February 2013 and there were four months overdue the lies continued the financial forecasts that Sonny gave to investors were 10 times higher than the internal forecasts of the company these numbers were completely fabricated as Theron operated without a CFO for the last seven years ever since he was fired ther enosis board as always were still stacked with high-profile reputable names so no one doubted the company this
• 15:00 - 15:30 included former US Secretary of State Henry Kissinger former director of the US Office of Management and Budget George Shultz and future Secretary of Defense Jim Mad Dog matters had all joined the board the company was very politically connected by the stage Elizabeth even through Hillary Clinton the fundraiser for her 2016 campaign money just kept pouring in partner fun to put ninety four million dollars in shares Rupert Murdoch chipped in 125 million the Walmart brothers put in 150
• 15:30 - 16:00 million the DeVos family put in another hundred million this gave theranos a nine billion dollar valuation and Elizabeth was worth five billion dollars one the shortcomings of the technology were well known within the company but employees were usually too scared to do anything fearing retaliation from sunny Elizabeth or the company's lawyers employees were forced to sign confidentiality agreements when they started and again when they left this stopped a lot of people from taking action
• 16:00 - 16:30 Tylar shorts grant another board member George Shultz was in a more privileged position he noticed the issues of thoroughness and after falling on Sonny and Elizabeth's deaf ears he quit he tried to talk to his grandfather he told George about the Edison's inaccuracy and the constant failing of quality control tests he told him about how fairness had doomed everyone by testing samples on existing third-party commercial machines not fairness his own Edison machines incredibly Elizabeth had put such a spell on George Shultz that he would
• 16:30 - 17:00 disregard everything his grandson Tyler told him in mid-2014 fortune magazine released a front page story titled this CEO is out for blood this Rockets Elizabeth - celebrity status and from this point she is constantly making media appearances Forbes USA Today NPR Fox Business CNBC CNN and CBS News all took their turn to cover the success story of the youngest ever self-made female billionaire Barack
• 17:00 - 17:30 Obama made Elizabeth the US ambassador for global entrepreneurship and she was added to the board of fellows at Harvard Medical School Elizabeth enjoyed the fame she grew her security team 220 her office was redesigned to look like the president's Oval Office complete wood bulletproof glass Elizabeth spoken a TED talk about her idea to change the world she said soon no one would have to say goodbye too soon and went on to tell the audience of a heartfelt story about how her uncle had passed away from cancer
• 17:30 - 18:00 but of course the TED talk was merely an act in reality she wasn't even close to her uncle and had just exploited his death for her narrative meanwhile cracks were beginning to crumble the Empire Richard by this stage had created a gang of fairness skeptics including Ian's Widow Rochelle they collected information and then took it to John Kerry we at The Wall Street Journal as John began investigating countless sources and former employees came out of the woodwork they anonymously provided information
• 18:00 - 18:30 about the story Thera nose attacked everyone who was talking they used their pile of money and they threatened to sue everyone else he spoke to the Wall Street Journal they even hired private investigators to stalk anyone they suspected several letters were sent to the Wall Street Journal to try and kill the story threatening defamation lawsuits Rupert Murdoch the owner of The Wall Street Journal and investor and thoroughness was asked by Elizabeth to personally kill the story he refused stating that he had confidence in the editors to handle the truth whatever it may be the
• 18:30 - 19:00 reaction from thoroughness was intense and the story wasn't even out yet business that usual continued at fairness Elizabeth was making Whitehouse appearances often then but under the veneer the machines could still only do a small number of tests and where inaccurate would even just those thoroughness continue to demonstrate the minilab VIP guests they pricked their finger then waited until they left and then went on to use existing commercial third-party lab machines to return the results Vice
• 19:00 - 19:30 President Joe Biden even paid Theron also visit he was shown a fake lab that was set up just for the visit he was impressed saying that there was the lab of the future and praised fairness the dark truth about fairness was finally unveiled in The Wall Street Journal article of October 15th 2015 it was a bombshell all the major news articles picked it up people began questioning thoroughness and its secrecy Elizabeth took it olena stride not shying away from the questions but instead outright
• 19:30 - 20:00 lying to the public it appeared that she thought everyone would just believe her again but this time it was different now people were asking serious questions [Music] and just this morning The Wall Street Journal ran a pretty scathing article about the company legend if the company's proprietary testing devices may be inaccurate and basically accusing thoroughness of deceptive practices to Elizabeth Holmes the founder and CEO of Thoreau knows give her a chance to answer the charges raised in the article this home was welcomed back to me of money it's great to be here thank you
• 20:00 - 20:30 what do you think's going on here this is what happens when you work to change things and first they think you're crazy then they fight you and then all of a sudden you change the world and I have to say I I personally was shocked to see that the journal would publish something like this just as the story had been published the FDA made a surprise inspection of thier nose in further investigations it was found that the fairness edison blood testing machine only performed 12 out of 250 tests and
• 20:30 - 21:00 even those produced wildly erratic results now Thera nose was in full damage control Elizabeth broke up with Sonny and fired him a criminal investigation was underway and a probe by the Securities and Exchange Commission was also proceeding the investors began suing theranos one by one partner fund sued for a hundred million Walgreens for a hundred and forty million Elizabeth had to close the trial out and had to pay four point five million dollars to Arizona State where most patients had received testing
• 21:00 - 21:30 thoroughness had voided nearly a million lab results ten patients would sue fairness for medical battery but shockingly amongst all of this Elizabeth never apologized it seemed to her mealy mistake along the way which could be fixed so Elizabeth and Sonny both knew what they were doing lying to investors their clients the regulator's patients and even their own board no one outside can be blamed for
• 21:30 - 22:00 not realizing the fraud ahead of time even the board made up of seasoned professionals was masterfully manipulated into giving Elizabeth ninety nine point seven percent of the voting rights she seemed by all accounts a sociopath willing to stop at nothing to make her company a success not caring who or what got in her way and who knows how far the lie could have gone she continued with all smiles and even after the truth came out Elizabeth's actions could be a microcosm a case for a modern problem in society
• 22:00 - 22:30 whether need to be successful or at least appear successful outweighs everything else there's possibly another fault at play here a Fault in the human condition it's the illusionary effect where if you repeat a lie enough times people start to believe it especially if you have credible names surrounding the product the SEC settled with Elizabeth Holmes in March of 2018 she lost voting control had to give away her portion of the stock and was banned from being an officer a director of any public company for ten years sunny still
• 22:30 - 23:00 hasn't reached a settlement with the SEC both Sonny and Elizabeth have been indicted on criminal charges in an ongoing lawsuit at the time of this video they are both pleaded not guilty and each faced 20 years in prison Thera nose was dissolved in September 2018 so one question remains if fairness was to keep going would they have made it with their blood testing machinery ever have worked well actually it's a harder question to answer than one might think when they were running out of
• 23:00 - 23:30 money they tested on real patients as a proof of concept to gain more funding which is of course what brought them down in the first place but say they did get funding without testing on patients the unveiled mini lab was only incrementally better than the Edison machine even though fairness had hundreds of millions of dollars at their disposal so if that being said is pretty unlikely that any company would have succeeded in this so that wraps up our look at fairness so I know that would have lost some of the faith and humanity that you had but if you want to see some real
• 23:30 - 24:00 actual breakthroughs and research in the medical field the things such as real-life nanobots being used in cancer with with success in mice trials or stem cells being injected directly into the brains of stroke victims allowing for recovery has never seen before and even enabling a wheelchair-bound man to walk again this is the kind of cool stuff that gets lost in the sea of media day to day but you can find those videos right here on ColdFusion I'll leave a link in the description below anyway thanks for watching this has been - go go you've been watching cold fusion and I'll see you again soon for the next
• 24:00 - 24:30 video Shia's guys have a good one [Music] you [Music]